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The ongoing Gulf Coast recovery effort drew passing grades from the Government Accountability Office Thursday but the Bush administration got a strong warning from Sen. Mary Landrieu, D-La., about stinting on money for levee reconstruction around New Orleans.

At a hearing of the Senate Homeland Security and Governmental Affairs Disaster Recovery Subcommittee, chaired by Landrieu, the GAO's Stanley Czerwinski said the administration's lead agencies -- Federal Emergency Management Agency and the Housing and Urban Development Department -- were doing a commendable job in meeting short-term needs of Hurricane Katrina victims but cautioned the panel that an effective long-term strategy for restoring the ravaged economies of Louisiana and Mississippi had yet to be settled.

Former Federal Deposit Insurance Corporation Chairman Donald Powell, President Bush's federal coordinator of Gulf Coast Rebuilding, also testified and agreed that a "path must be drawn" for future recovery of the area.

"Although there are a number of immediate short-term needs," he said, "rebuilding cannot be seen in the short term. There must be a long-term vision of where each state wants to be five, 10 or 20 years from now."

That plan, he said, is mainly the responsibility of the state and local governments who are best suited to determine their needs -- although the federal government stands ready to help when asked.

Czerwinski, noting that "rebuilding efforts are at a critical turning point," said most of the early efforts have been aimed at restoring destroyed housing and essential public infrastructure. "Over the coming years, perhaps decades, significant and complex challenges lie ahead, [including] coastal restoration, levee protection, infrastructure, land use and economic recovery," he said.

Every level of government, he said, together with private and non-profit sectors, will have to step up to the task. "Agreeing on what rebuilding will be done, where, how and -- particularly important -- who will bear the costs, will be the key to moving forward."

Already, long before any long-term plan has been hatched, a rift over money has erupted. Before ending the testimony of Powell and Czerwinski, Landrieu criticized Bush for shifting approximately $1.3 billion in levee reconstruction funds from one account to another, which she insisted will eventually short-change the project.

Powell tried to explain that the transfer was necessary to prevent a sudden halt in the project until Congress acted later to replenish the supplemental funding for the Gulf Coast recovery.

"We needed to transfer the money to ensure the work would not be disrupted," he said, prefacing his remark with his belief that the president is "committed to spending the necessary money to protect against a 100-year flood [risk]."

But Landrieu was having none of it. She said Bush has threatened to veto the supplemental bill for the wars in Iraq and Afghanistan if the $1.3 billion is put back into the project. Spending the money now without replacing it later, she said, would mean that "we'd still end up $1.3 billion short."

Despite the veto threat, she added, she intends to see that the money is restored in the supplemental war spending bill. "And I want you to take that message to the president," she said.

Asked later by a reporter whether he intended to deliver that message, Powell smiled and said: "Yes, absolutely, it will be delivered."

Landrieu also expressed hope that the administration would, as it has done in other major disasters, waive a provision in current law that requires local or state governments to put up 10 percent of their own money in order to qualify for federal Community Development Block Grants, which have been used in the Gulf recovery effort to replenish the ruined public housing stock.

Czerwinski told the panel "a disaster of this magnitude ... makes it impossible for local communities to come up with their share of the money."

One of the consequences of enforcing the 10 percent rule, he said, was that some communities have had to rely on private contractors to front the money, leading to higher carrying costs and greater strain on the local governments.

He also said that banking on private capital had the effect of dealing small, local contractors out of the reconstruction business since they do not have the up-front resources themselves.

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